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Incentive Management

Incentive management plays an important role in motivating employees and boosting their performances to align the business goals. Incentive management includes designing, implementing and administering the program.

The program not only includes monetary rewards but simple offerings too such as recognition, appreciation, flexible work arrangements or career development opportunity.

What is incentive management?

Incentive management is a process of formulating design, implementation and administration of programs within an organization to motivate employees, boost productivity and performance and align the business goals.

Incentive management includes extra pay, rewards to employees that meet benchmarks or extra time off, this allows employees to inspire them and do better than their ordinary responsibilities.

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What are incentive management plans?

Incentive management plans, also referred to as executive plans are specific programs designed to provide incentives and rewards to senior executives or management-level employees based on the achievements of business objectives.

The  plans are aligned to the interest of executives with the goals of the company, motivating them to drive performances.

Various types of incentives are as follows:

Performance shares
Long-term incentive plans
Result-driven cash incentives

  1. Performance-incentive: Employees may be eligible on the basis of  their individual or the company’s performance. The bonus amount can be identified on the basis of performance goals, which may involve revenue growth, profitability or financial targets.
  2. Performance shares: Performance shares are received on the basis of achievements of specific goals or metrics over a period of time.
  3. Long-term incentive plans: Long-term incentive plans include equity-based incentives such as stock options, performance shares and have multi-year performance periods.
  4. Result-driven cash incentives: Cash incentives include cost savings or market share growth, helps to provide immediate financial rewards based on outcomes.

How does management incentive plan work?

Management incentive plans are created to align the business goals with the performance of the employees with an objective in mind, which may include financial or non-financial incentives based on achieving specific targets.

General steps of management incentive plans includes:

Setting a specific goal
Incentive setup
Performance measurement
Calculation of incentive
Open communication
Incentive distribution

  1. Setting a specific goal: The businesses set a clear goal for a month or year based on the needs that allows them to visualize the structure of the incentive. It helps to manage specific metrics that will measure performance and who is eligible for incentives.
  2. Incentive setup: The plan helps to figure the structure of the incentives. It determines the metrics or criteria that will help measure the performance.
  3. Performance measurement: Businesses track and determine the performance of the employees against the target. The performance measurement period is typically determined in the incentive plans.
  4. Calculation of incentive: According to the results, the businesses calculate the incentives that will be granted for the eligible employees.
  5. Open communication: The business should maintain an open communication to the eligible employees and ensure transparency regarding the metrics and rewards.
  6. Incentive distribution: after the incentives are calculated or determined, the business distributes it to the employees according to the performances.

Who is responsible for incentivizing upper management to meet or exceed goals?

The responsibility for incentivizing upper management to meet or exceed goals lies with the business’s board of directors or leadership team. Here are some stakeholders involved in incentivizing upper management:

Board of directors
Employee leadership team
Human resource department
Compensation committee

  1. Board of directors: This is the main governing body of any business who establish incentive plans and formulate the plan to allocate the rewards based on the performance outcomes.
  2. Employee leadership team: The top-level management in the hierarchy is responsible for setting targets, monitoring progress and incentivizing to exceed the goals, which includes CEO and other C-suite executives.
  3. Human resource department: The HR department sync with the board of directors and the leadership team to determine and administer incentive plans. Their role is to ensure fair structure which also be competitive and comply legal requirements.
  4. Compensation committee: The compensation committee is responsible for determining and implementing compensation and incentive plans. They access performance metrics which should be aligned with the company’s goals.

What are the benefits of incentive management?

Benefits of incentive management are as follows:

Increase productivity
Goal alignment
Talent retention
Better teamowork

  1. Increase productivity: Incentivizing the employees leads to increased productivity and motivates them to work diligently and focus towards the achieving target. By this there is always a room for improvement and helps to build a culture of high performance across the organization.
  2. Goal alignment: Incentive management allows to align individuals with the goals of the team. This can be done by determining performance metrics, ensuring employee's efforts matters which should be directed towards priorities and initiatives.
  3. Talent retention: Well-structured incentive management programs allow to attract and retain potential employees within the organization. It is seen in the competitive market, offering attractive incentives can signify attracting potential employees.
  4. Employee engagement: Incentives help in engaging employees and improve their satisfaction towards the organization, also helps to boost morale towards their work.
  5. Better teamwork: Incentive programs help to foster team-oriented culture by supporting each other, sharing knowledge and working together, which helps to communicate better, cooperate and sync positive energy among team members.

Name some incentive management software

Some of the incentive management softwares which helps boost productivity and align the performance with the goals are as follow:

Xoxoday Compass
Xactly Incent
Core Commission

  1. Xoxoday Compass: Xoxoday Compass, the powerful incentive compensation management software helps enterprises to easily motivate and engage their sales teams with timely incentives and commissions.
  2. Xactly Incent: This is a popular incentive management platform that helps to automate and streamline incentive compensation process, it offers features like performance tracking, commission calculation and reporting.
  3. Anaplan: It provides a comprehensive incentive compensation management solution that enables organizations to design,model and manage incentive plans.
  4. Performio: This is another incentive management solution platform which allows to automate sales commission reporting and calculations, also comes with the features like designing plan, performance tracking and analysis.
  5. Core Commission: Core Commission is a simplified sales commission and incentive process which is a flexible and powerful sales commission management system fully integrated. These tools are intuitive and cost effective but resolve complex problems.

Employee pulse surveys:

These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).

One-on-one meetings:

Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.


eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.

Based on the responses, employees can be placed in three different categories:

  • Promoters
    Employees who have responded positively or agreed.
  • Detractors
    Employees who have reacted negatively or disagreed.
  • Passives
    Employees who have stayed neutral with their responses.

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